Look at the world economy as a whole, and you could be forgiven for thinking that the recovery is in pretty decent shape. This week the IMF predicted that global GDP should expand by 4.8% this year””slower than in the boom before the financial crisis, but well above the world’s underlying speed limit of around 4%. Growth above trend is exactly what you would expect in a rebound from recession.
Yet this respectable average hides a series of problems. Most obviously, there is the gap between the vitality of the big emerging economies, some of which have been sprinting along at close to 10%, and the sluggishness of many rich ones. Macroeconomic policy is also weirdly skewed: many emerging economies are loth to let their currencies rise to reflect their vigour, even as fragile rich ones are embarking on austerity programmes. And finally there is a crucial missing ingredient just about everywhere: “micro” structural reform, without which current growth rates are unlikely to last.
Read it all.
The Economist Leader–The quest for growth may depend on structural reforms
Look at the world economy as a whole, and you could be forgiven for thinking that the recovery is in pretty decent shape. This week the IMF predicted that global GDP should expand by 4.8% this year””slower than in the boom before the financial crisis, but well above the world’s underlying speed limit of around 4%. Growth above trend is exactly what you would expect in a rebound from recession.
Yet this respectable average hides a series of problems. Most obviously, there is the gap between the vitality of the big emerging economies, some of which have been sprinting along at close to 10%, and the sluggishness of many rich ones. Macroeconomic policy is also weirdly skewed: many emerging economies are loth to let their currencies rise to reflect their vigour, even as fragile rich ones are embarking on austerity programmes. And finally there is a crucial missing ingredient just about everywhere: “micro” structural reform, without which current growth rates are unlikely to last.
Read it all.